You’re hired. You’re fired.

Tuesday, June 30th, 2009

For his first job in Silicon Valley, Steve Blank was hired as a lab technician at ESL to support the training department:

I packed up my life in Michigan and spent five days driving to California to start work. (Driving across the U.S. is an adventure everyone ought to do. It makes you appreciate that the Silicon Valley technology-centric culture-bubble has little to do with the majority of Americans.) With my offer letter in-hand I reported to ESL’s Human Resources (HR) department. I was met by a very apologetic manager who said, “We’ve been trying to get a hold of you for the last week. The manager of the training department who hired you wasn’t authorized to do so – and he’s been fired. I am sorry there really isn’t a job for you.”

I was stunned. I had quit my job, given up my apartment, packed everything I owned in the back of my car, knew no one else in Silicon Valley and had about $200 in cash. This could be a bad day. I caught my breath and thought about it for a minute and said, “How about I go talk to the new training manager. Could I work here if he wanted to hire me?” Taking sympathy on me, the HR person made a few calls, and said, “Sure, but he doesn’t have the budget for a lab tech. He’s looking for a training instructor.”
As I talked to the head of training and his boss, I pointed out that the clock was ticking down for them, I knew the type of training military maintenance people need, and I had done some informal teaching in the Air Force. I made them a pretty good offer – hire me as a training instructor at the salary they were going to pay me as a lab technician. Out of desperation and a warm body right in front of them, they realized I was probably better than nothing. So I got hired for the second time at ESL, this time as a training instructor.

The good news is that I had just gotten my first promotion in Silicon Valley, and I hadn’t even started work.

The bad news is that I had 6 weeks to write a 10 week course on three 30-foot vans full of direction finding electronics plus a small airplane stuffed full of receivers. “And, oh by the way, can you write the manuals for the operators while you’re at it.”

Two weeks before the class was over the head of the deployment team asked him to come along to Korea: “We’ll get you temporarily assigned to us and then you can come back as a Test Engineer/Training Instructor and work on a much more interesting system.” This led to his roommate philosophizing about how he kept getting more and more interesting jobs:

His theory, he told me, was this: “You’re not so smart, you just show up a lot in a lot of places.” I wore it as a badge of honor.

A Master of the Consultative Sale

Friday, June 26th, 2009

Twenty-eight years ago, Steve Blank was a bright, young, eager product marketing manager called out to the field to support sales by explaining the technical details of products to potential customers. He was not a master of the consultative sale:

Convergent’s business was selling desktop computers (with our own operating system and office applications) to other computer manufacturers — most of them long gone: Burroughs, Prime, Monroe Data Systems, ADP, Mohawk, Gould, NCR, 4-Phase, AT&T. These companies would take our computers and put their name on them and resell them to their customers.

Business customers were starting to ask for “office automation solutions” — word processing, spreadsheets, graphing software on a desktop. This was just before the IBM PC hit the desktop so there were no “standard” operating systems or applications for desktop platforms. Computer hardware companies were faced with their customers asking for low-cost (relatively) desktop computers they had no experience in building. Their engineering teams didn’t have the expertise using off-the-shelf microprocessors (back then “real” computer companies designed their own instruction sets and operating systems.) They couldn’t keep up with the fast product development times that were enabled by using standard microprocessors. So their management teams were insisting that they OEM (buy from someone else) these products. Convergent Technologies was one of those OEM suppliers.

Their engineers hated us.

I was traveling with the regional sales manager who had called on these companies, gotten them interested and now needed someone from the factory to provide technical details and answer questions about how the product could be configured and customized.

As the eager young marketer on my first sales call, as soon as we shook hands I was in front of the room pitching our product and technical features. I knew everything about our operating system, hardware and applications – and I was going to prove it. I talked all about how great the new products were and went into excruciating detail on our hardware and operating system and explained why no one other than our company could build something so brilliantly designed. (This being presented to another company’s proud engineering team who was being forced to buy product from us because they couldn’t build their own in time.) After I sat down I was convinced the only logical conclusion was for the customer to tell us how many they wanted to buy.

The result wasn’t what I expected. The customers didn’t act particularly excited about the product and how brilliantly I presented it. I do believe some actually rolled their eyes. They looked at their watches, gave our sales guy a quizzical look and left.

After the meeting our sale rep took me aside and asked if “perhaps I wouldn’t mind watching him on the next call.“

The next day, as I drove to our next meeting the sales guy was intently reading the sports section of the newspaper and as I glanced over he seemed to be writing down the scores. I wondered if he had a bookie. When we got to the meeting he reminded me to be quiet and follow his lead.

We shook hands with the customers, but instead of launching into a product pitch (or better, letting me launch into the pitch) he started asking how their families were. He even remembered the names of their wives and kids and some details about schools or events. (I couldn’t believe it, here we were wasting precious time and the dumb sales guy is talking about other stuff.)

Just as I thought we were going to talk about the product, he then mentioned the previous nights football game. (Damn, another five minutes down the tube as the whole room chimed in with an opinion as we talked about something else unimportant.)

Then instead of talking about our products he segued the conversation into their products. He complemented their elegantly designed minicomputers and made some astute comment about their architecture (now I’m rolling my eyes, their computers were dinosaurs) and asked who were the brilliant designers. I was surprised to see that they were in the room. And soon the conversation were about architectural tradeoffs and then how customers didn’t appreciate the elegant designs and how the world was going to hell in a handbasket because of these commodity microprocessors. And our sales guy was agreeing and commiserating. (And I’m thinking why is he doing all this, just tell these idiots that the world has passed them by and they need to buy our stuff and lets get an order.)

The engineers spoke about all the pressure they were getting from management to build desktop personal computers rather than their traditional minicomputers. And that their management wanted these new systems on a schedule that was impossible to meet. Then our sales guy says something that makes me stop breathing for a while. “I bet if your management team would give you guys the resources you guys could build desktop computers better than anyone, even better than us.” There’s a unanimous agreement around the table about how great they were and how bad management was.

The Consultative Sale

Our sales guy then quietly asked if there was any way we could help them. (Help them?!! We’re here to sell them our stuff, why can’t we just present what we got and they’ll buy it.) The VP of Engineering says, “well we don’t have the resources or time, and as long as you know we could build better computers then you guys, why don’t you tell us the details about your computers.”

I had just watched a master of the consultative sale.

Elephants Can Dance

Tuesday, June 23rd, 2009

Steve Blank was at the Stanford library, going through the papers of Fred Terman, the professor who encouraged Bill Hewlett and David Packard to start HP, when he came across this letter from Hewlett back to Terman:

At the time, HP was a 17-year old company with $20 million in test equipment sales and 900 employees. It was still a year away from its IPO.

Ten years later — at Dave Packard’s insistence — it introduced its first computer, the HP2116A, as an instrument controller.

Thirty-three years after that, it split into two companies, which have gone their separate ways:

  • Agilent is a $5.8 billion dollar test and measurement company.
  • Hewlett Packard (HP) is a $118 billion PC manufacturer — the largest in the world.

And that’s why Steve Blank says that elephants can dance — under the guidance of either a founder or an outsider with fresh eyes:

Intel was founded in 1968 to make memory chips (bipolar RAM) but 17 years later they got out of the memory business and become the leading microprocessor company.

IBM had a near death experience in 1993, and moved from a product-centric hardware company to selling a complete set of solutions and services.

After failing dismally at making disposable digital cameras in 2003 Pure Digital Technologies reinvented their company in 2007 to make the Flip line of camcorders.

Apple was a personal computer company but 25 years after it started, it began the transformation to the iPod and iPhone.

A few carriage makers in the early part of the 20th century made the transition to become car companies. A great example is William Durant’s Durant-Dort Carriage Company. Durant took over Buick, in 1904 and in 1908 he created General Motors by acquiring Oldsmobile, Pontiac, and Cadillac.

Rocks in the Rocket Science Lobby

Monday, June 1st, 2009

In 1994, Rocket Science Games was the hip, new, edgy, “Hollywood meets Silicon Valley” video game company — or, alternatively, a “big hat, no cattle” startup — with a rock in the lobby:

Our receptionists’ desk was built on the wing of a WWII P-51 fighter plane, and the rest of the office décor matched. All that is, except for our lobby, as our offices were on the 4th floor. When you got off the elevator, you faced a non descript corporate-looking set of walls.

This was about the time Christies and Sotheby’s were starting to auction Soviet space program artifacts, and I was thinking that perhaps a spacesuit in the lobby would be appropriate given our name.
A week later as our employees came up the elevator there was a Lucite case on a pedestal with a single grey rock, lit with a single spotlight, on a velvet pillow. In front of it was a brass plaque that read:

“Moon rock, Apollo 18, July 1973 – Copernicus Crater.”

For the next few years, people from all around South of Market would come by the Rocket Science Games lobby to see our moon rock. It added to the mystique of the company – which helped with raising money and getting press ink. Everyone agreed that having our own moon rock was way cool.

In all that time, not a single person who admired the moon rock questioned its provenance or authenticity. A bit surprising considering the intersection between geekdom and space. Maybe it was just too much ancient history.

NASA’s moon missions ended at Apollo 17.

The rock was a piece of rubble from the [recently demolished] Embarcadero Freeway.

Only over time would I realize it augured the future of the company.

The Novelty Effect

Monday, May 25th, 2009

Steve Blank (The Four Steps to the Epiphany) tells the story of the Video Spigot and the Novelty Effect:

It was early 1991 and Apple’s software development team was hard at work on QuickTime, the first multimedia framework for a computer. At the time no one (including Apple) knew exactly what consumers were going to do with multimedia, it was still pre-Internet. But the team believed adding video as an integral part of an operating system and user experience (where there had only been text and still images) would be transformative.

But Apple had planned to announce and demo QuickTime without a way to get video into the Mac. They had this great architecture, and Apple had figured out to get movies into their own computers for a demo, but for the rest of us there was no physical device that allowed an average consumer to plug a video camera or VCR into and get video into a Mac.

A month or two before the QuickTime public announcement in May, the SuperMac hardware engineers (who had a great relationship with the QuickTime team at Apple) started a “skunk works” project. In less than a month they designed a low-cost video-capture board that plugged into the Mac and allowed you to connect a video camera and VCR. But to get video to fit and playback on the computers of the era, they needed to compress it. So SuperMac engineering also developed video compression software, called Cinepak. The software was idiot proof. There was nothing for the consumer to do. No settings, no buttons — plug your camera or VCR in and it just worked seamlessly. (The Cinepak codec was written by the engineer who would become my cofounder at Rocket Science Games.) It worked great on the slow CPUs at the time.

Engineering gave us a demo of the prototype board and software and asked, “Do you guys think we can sell a few of these boards?” Remember, this is the first time anyone outside of Apple or the broadcast industry had seen moving images on a Macintosh computer. (A company called Avid had introduced a $50,000 Mac-based professional broadcast video editing for two years earlier. But here was a $499 product that could let everyone use video.) Our engineers connected a VCR, pushed a button and poured in the video of the Apple 1984 commercial. We watched as it started playing video at 30 frames/second in a 320 x 240 window.

Up until that moment Quicktime had been an abstract software concept to me. But now, standing there, I realized how people felt when they saw the first flickering images in a movie theater. We must have made them play the demo twenty times. There were a few times in my career I knew at that moment I was watching something profound — (Holding the glass masks of the Z80 microprocessor. My first IPO at Convergent. First silicon of the MIPS RISC processor.) I stood there believing that video on computers was another — and equally as memorable.

When we all regained the power of speech, our reaction was unanimous, “What are you talking about — can we sell it? This is the first way to get video into a computer, we’re going to sell and market this board like there’s no tomorrow. Even though we won’t make a ton of money, it will be an ambassador for the rest of our product family. People who aren’t current customers of our graphics boards will get to know our company and brand. If we’re smart we’ll cross-sell them one of our other products. We might even sell a few thousand of these.”

Everyone laughed at such an absurd number.

“What are we going to call it? Lets see. It’s video input. How about we call it the Video Spigot?”

Now, in hindsight, with a spigot, you’re actually pouring stuff out, and, in fact, the ad actually shows you stuff pouring stuff out, but into your Mac. It made no logical sense (a fact engineering reminded us about several times.) But it made the point that this device could pour video into your Mac and consumers instinctually got it.

Our CEO and our VP of manufacturing were incredibly nervous about manufacturing more than a few hundred of these boards. “There’s nothing to do with this product once you get the video in. You can’t manipulate it, you can’t do anything other than playback the video in QuickTime.” And they were right. (Remember there were no video applications available at all. None. This was day zero of consumer video on the Mac.)

Our answer was, “People will love this thing, as long as we don’t oversell the product.” We knew something our CEO didn’t. We had seen the reactions of people playing with the prototypes in our lab and when we demo’d it to our sales force. When we saw our salespeople actually trying to steal the early boards to take home and show their kids, we knew we had a winner. All we had to do was tell customers they could get video into their computer — and not promise anything else.

But the rest of the management team really skeptical. We kept saying, “Don’t worry, we’re going to sell thousands of these.” Little did we know.
We launched the product with this ad that said “Video Spigot, now pour video into your computer,” and this just hit a nerve.

We sold 50,000 Video Spigots in six months.

Rabbits Out of the Hat

Sunday, May 24th, 2009

Steve Blank (The Four Steps to the Epiphany) explains how they were able to pull so many rabbits out of the hat at SuperMac. It all starts with some good news and some bad news from Engineering:

The bad news: The new family of eight high performance graphics cards we were counting on couldn’t be delivered. The plug-in co-processor architecture was too complex and couldn’t be made to work reliably. Instead of the family of eight products we were expecting, only one could be delivered. Nothing else was in the development pipeline for the next 12 months.

The good news: Instead of eight boards, Engineering was going to be able to deliver one new graphics board. Just one. But it was going to be the fastest graphics board ever made. In fact, according to our Potrero benchmark suite this new board ran our customer applications ten times faster than our current products.

So, instead of a product family, like their competitors had, they had just one product. What to do?

The next day I walked in uninvited to the VP of Engineering’s office and asked if he had a minute. I said, “I realize you’re trying to get the one board out to market, but I have a question — can you slow our new board down?” It doesn’t take much imagination to see the look he gave me when I asked that question. “Steve, this hasn’t been a good week. What do you really want?” I felt sorry for him, he was working really hard to dig out of this mess. I replied, “No joke. Can you make it slower? I think he wanted to strangle me as he barely got out, “We worked for years to deliver a product that’s ten times faster than anything that exists and you want to make it slower?” Well, not exactly, “What I want to know is if the board would work if you slowed it down by 10%?” Yes, was the answer. “How about if you slowed it down 20%?” Yes, was still the answer. “By 30%?” The change in his demeanor — from trying to kill me — to laughing, as it dawned on him where I was going, could only be described as hysterical relief. “40%?” Yes, yes and yes.

We were about to be partners in building a new product family.

First, what we proposed is that we take our world class, ten-times-faster-than-anyone board and build an entire product family around it, by slowing it down. We wanted nine boards, each differing in performance by 10%. The only real difference between them would be the addition of “wait states” or “slow down” instructions on a chip. Our entire new product family would be an identical board.
Next, we were going to create three separate product families, each its own unique brand. And within each brand we would have a “good”, “better”, and “best” graphic board. All tailored to our color publishing market.

Finally, these product families would be priced to bracket (box in) everyone of our competitors’ products with better price and performance. We were going to price the products from $699 to $3,999. Our calculations had us losing money on the two lowest cost boards, breaking even on the third and making great margins on the other six. We calculated our blended gross margin for the company by estimating the number of units we would sell of each board times the gross margin of each individual board (then I crossed my fingers and prayed we were right.)

In essence we were proposing that we ship the same board in 9 different colored boxes and charge from $699 to $3,999 depending on the color of the box and the speed of the board. (This turned out to give our customers immense value. We would have charged $3,999 for the high-end board. Now we could give customers lower price boards without Engineering spending 12 months to design new ones.)

This was not a popular strategy within the company — but it worked:

Our new graphics boards became the market leader of the industry. In three and a half years SuperMac’s market share went from 11% to 68%, as we went from bankruptcy to $150 million in sales.

Years later, I was having coffee with the VP of Sales and Marketing from one our competitors and he said, “We would have beat you guys, but we just couldn’t keep up with the tidal wave of products coming from your engineering department. They came up with exactly the right products at the right price.” I took a long sip of coffee as I thought of all the things I could say. Instead I smiled, nodded and said, “Yep, it was amazing, they just kept pulling rabbits out of the hat.”

Library Hours at an Undisclosed Location

Saturday, May 23rd, 2009

As a very junior employee at a very secure “customer” site, Steve Blank (The Four Steps to the Epiphany) found himself reading more than he was supposed to:

Before long I realized that down the hall sat all the manuals for all the equipment at the entire site. Twenty times more technical reading than just my equipment. Although all the manuals were in safes, the whole site was so secure that anybody who had access to that site had access to everything — including other compartmentalized systems that had nothing to do with me — and that I wasn’t cleared for. Back home at ESL control of compartmentalized documents were incredibly strict. As a contractor handling the “customer’s” information, ESL went by the book with librarians inside the vaults and had strict document access and control procedures. In contrast, this site belonged to the “customer.” They set their own rules about how documents were handled, and the safes were open to everyone.

I was now inside the firewall with access to everything. It never dawned on me that this might not be a good idea.

Starting on the safe on the left side, moving to the safe on the right side, I planned to read my way through every technical manual of every customer system. We’re talking about a row of 20 or so safes each with five drawers, and each drawer full of manuals. Because I kept finding interesting connections and new facts, I kept notes, and since the whole place was classified, I thought, “Oh, I’ll keep the notes in one of these safes.” So I started a notebook, dutifully putting the classification on the top and bottom of each page. As I ran into more systems I added the additional code words that on the classification headers. Soon each page of my notes had a header and footer that read something like this: Top Secret / codeword/ codeword / codeword / codeword / codeword / codeword / codeword.

I was in one of the most isolated places on earth yet here I was wired into everywhere on earth. Coming to work I would walk down the very long, silent, empty corridors, open a non-descript door and enter the operations floor (which looked like a miniature NASA Mission Control), plug a headset into the networked audio that connected all the console operators — and hear the Rolling Stones “Sympathy for the Devil.” (With no apparent irony.) But when the targets lit up, the music and chatter would stop, and the communications would get very professional.

Nine months into my year tour, and seven months into my reading program, I was learning something interesting every day. (We could do what!? From where??) Then one day I got a call from the head of security to say, “Hey, Steve can you stop into my office when you get a chance?”

Now this was a small site, about 100–200 people, and here was the head of security was asking me over for coffee. Why how nice, I thought, he just wants to get to know me better. (Duh.) When I got to his office, we made some small talk and then he opened up a small envelope, tapped it on a white sheet of paper, and low and behold, three or four long black curly hairs fall out. “Are these yours?” he asked me.

This the one of the very few times I’ve been, really, really impressed. I said, “Why yes they are, where did you get them?” He replied, ‘They were found in the ‘name of system I should have absolutely no knowledge or access to’ manuals. Were you reading those?” I said, “Absolutely.” When he asked me, “Were you reading anything else?” I explained, “Well I started on the safe on the left, and have been reading my way through and I’m about three quarters of the way done.”

Now it was his turn to be surprised. He just stared at me for awhile. “Why on earth are you doing that?” he said in a real quiet voice. I blurted out, “Oh, it’s really interesting, I never knew all this stuff and I’ve been making all these notes, and …” I never quite understood the word “startled” before this moment. He did a double-take out of the movies and interrupted me, “You’ve been making notes?” I said, “Yeah, it’s like a puzzle,” I explained. ”I found out all this great stuff and kept notes and stored in the safe on the bottom right under all the…” And he literally ran out of the office to the safes and got my notebook and started reading it in front of me.

And the joke (now) was that even though this was the secret, secret, secret, secret site, the document I had created was more secret than the site.

Speed and Tempo

Friday, May 22nd, 2009

”If things seem under control, you are just not going fast enough.”
— Mario Andretti

“A good plan violently executed now is better than a perfect plan next week.”
— General George Patton

Steve Blank‘s CEO friend was trying to run an agile tech startup but found himself still making slow, thorough, deliberate decisions like an engineer, so Steve offered him some advice on speed and tempo:

The heuristic I gave my friend was to think of decisions of having two states: those that are reversible and those that are irreversible. An example of a reversible decision could be adding a product feature, a new algorithm in the code, targeting a specific set of customers, etc. If the decision was a bad call you can unwind it in a reasonable period of time. An irreversible decision is firing an employee, launching your product, a five-year lease for an expensive new building, etc. These are usually difficult or impossible to reverse.

My advice was to start a policy of making reversible decisions before anyone left his office or before a meeting ended. In a startup it doesn’t matter if you’re 100% right 100% of the time. What matters is having forward momentum and a tight fact-based feedback loop (i.e. Customer Development) to help you quickly recognize and reverse any incorrect decisions. That’s why startups are agile. By the time a big company gets the committee to organize the subcommittee to pick a meeting date, your startup could have made 20 decisions, reversed five of them and implemented the fifteen that worked.

Tempo = Speed Consistently Over Time

Once you learn how to make decisions quickly you’re not done. Startups that are agile have mastered one other trick — and that’s Tempo — the ability to make quick decisions consistently over extended periods of time. Not just for the CEO or the exec staff, but for the entire company. For a startup Speed and Tempo need to be an integral part of your corporate DNA.

Tens of millions of years

Thursday, May 21st, 2009

Steve Blank (The Four Steps to the Epiphany) started his high-tech career as an enlisted man in the Air Force, where he kept asking questions about the big picture:

I was 19 in 1973 and in Thailand in the Air Force working on electronic warfare equipment on fighter planes, gunships and Wild Weasels, at the tail end of the Vietnam War. I remember asking out of the blue one day, “Where does our equipment come from, what is exactly that we’re doing?”

My sergeant looked at me like the dog just talked: “What do you mean, what are we doing? We’re fixing this equipment; that’s your job. When the pilots say it doesn’t work we take the stuff out of the plane, bring it to the shop make sure it really is broken, you know, and unbreak it.” And I went, “No, no, no, but why are we doing this?”

I wanted to understand more about the North Vietnamese and their surface to air missiles and radar guided AAA they got from the Russians, and how we were trying to out-smart them with receivers to pick up their radar and jammers to jam the acquisition radars and missile guidance uplink signals — a little of which I had learned in my one year of training at Keesler Air Force Base in Biloxi Mississippi. Since it was the military and I was a lowly airman (I was outranked by the rest of the entire air force), the answer I got was, “Don’t you know there’s a war on? Shut up and keep fixing that equipment.”

But I kept on asking enough questions until finally I got the attention again of the guy who had brought me off of the very hot and humid flight line into the shop in the first place, John Scoggins. John said, “You’re really interested in this stuff, aren’t you?” I said, “Yeah, you know, like where did it come from, I mean, how long have the Russians had this stuff? Why did they build it? How did we figure out how to build jammers?” There was no public history about surface to air missiles, though I’m sure there were probably some good classified histories, which I didn’t have access to.
John said, “Well, Steve, it’s been going on for tens of millions of years.” I said, “What are you talking about? I’m asking about electronic warfare and countermeasures.” He said, “Tens of millions of years.” And I said, “What?” And he said, “Meet me at the tennis courts tonight.”

John was a lifer, who I guess in hindsight was a nerd and was in his element as an enlisted guy, but a master sergeant. He must have been in his 30s, so a real “old” guy to a 19 year old.

So, he said, tennis courts, 8:00 PM tonight. You’re on an airbase with 180 fighter planes, but we had a tennis court and gym and all kinds of accoutrements to give thousands of airmen in the middle of a war zone an alternative to almost free drugs and women (note to military, nice try but it didn’t work.)

The tennis courts had these very bright lights, and they would attract all kinds of bizarre tropical insects, including these large flying water beetles. I don’t know their actual genus, but they were called “Baht Bugs” because the Thai locals would come and capture them and sell them for a nickel each since they were a delicacy, and the Thais would take the raw bugs and literally slurp out their insides in real time. So, they would be running around the tennis courts collecting Baht Bugs.

There were also these large moths that would attract bats.

So, I go to the tennis court, and there’s John Scoggins, and there’s a pile of electronic equipment in the corner, and it’s night, and no one played tennis at night, even though they lit the tennis court. But there’s a pile of electronic equipment under one of the lights with a parabolic dish antenna, kind of a miniature setup of stuff we had in the labs and our shop.
And I said, “What on earth is this?” John put on headphones, and he gave me a set of headphones, and all of a sudden I could hear this chirping sound. And I said, “What are we listening to?” He said, “Bats.” “What?” “Bats.”

John explained that bats have the equivalent of radar. Not radar in terms of microwave radar frequencies, but they use ultrasonic frequencies to locate their prey at night, and so it’s essentially radar to locate bugs. And since they fly at night, they don’t use vision; their ultrasonics are essentially their eyes. They’ve build up a mental map — just like our vision — with echolocation. They send out these chirps, and when one bounces off an object, it comes back. Then they would go after the moths. That’s what I was hearing was the radar signals of a bat.

We’re listening, and it’s very cool. And John was recording all this stuff on a reel-to-reel tape recorder, recording the flight of the bats as they were going after bugs. Every couple minutes he’d say, now listen to this one, and you’d hear the bat chirp, and then every once in a while you’d hear even a higher frequency but lower volume sound.

John said, “Listen, you can hear the jammer.” The what? “The jammer,” he said, “Watch the moths.” It turns out the moths, through evolution, had developed their own electronic countermeasures to jam the bat radar. They had developed ultrasonic receivers and ultrasonic jammers and physical countermeasures. When they picked up the bat radar illuminating them by sensitive hairs on their antennas, they would send out their own little squirt of ultrasonics by rubbing their legs together, jam the bat radar, and then they would immediately take evasive action and dive to the left and right.

Through Darwinian selection over millions of years, these moths had developed an entire electronic warfare, electronic countermeasures, electronic countercounter-measures suite, and here was a guy in 1973 in Thailand who was figuring this stuff out. To be honest, it was my first insight that there was really a bigger picture.

So, John’s point was, “I keep trying to tell officers way above me that there’s probably a ton we could learn from watching these natural systems. What we’re doing in the air war over the North is just nothing more than something that’s been going on in nature for millions of years, but I can’t seem to get anybody’s attention.” (Thirty years later MIT would develop the Insect Lab and work on swarm behaviors for UAV’s and robotics.)

Years later, I searched Google for anything written on moth/bat radar and countermeasures, and while now there are quite a few papers, John had never published anything on the subject. If he did he would have been 20 years ahead of everyone else. But I always had thought the bat and moth thing was incredibly cool, and it answered a question I had never even asked: where is all this coming from?

Watching the demise of the auto industry

Wednesday, May 20th, 2009

Steve Blank’s first job out of the Air Force and out of school was installing broadband process control systems in automotive and manufacturing plants throughout the Midwest in the mid-1970s, where he got to watch the demise of the auto industry:

[Automobile plants] were like being inside a pinball machine. At the Ford plant in Milpitas the plant foreman proudly took me down the line. I remember stopping at one station a little confused about its purpose. All the other stations on the assembly line had groups workers with power tools adding something to the car.

This station just had one guy with a 2×4 piece of lumber, a large rubber mallet and a folded blanket. His spot was right after the station where they had dropped the hoods down on the cars, and had bolted them in. As I was watched, the next car rolled down the line, the station before attached the hood, and as the car approached this station, the worker took the 2×4, shoved it under one corner of the hood and put the blanket over the top of the hood and started pounding it with the rubber mallet while prying with the lumber. “It’s our hood alignment station,” the plant manager said proudly. These damn models weren’t designed right so we’re fixing them on the line.”

I had a queasy feeling that perhaps this wasn’t the way to solve the car quality problem. Little did I know that I was watching the demise of the auto industry in front of my eyes.

Founders and dysfunctional families

Tuesday, May 19th, 2009

Steve Blank (The Four Steps to the Epiphany) has a theory about founders and dysfunctional families:

I was having lunch with a friend who is a retired venture capitalist and we drifted into a discussion of the startups she funded. We agreed that all her founding CEOs seemed to have the same set of personality traits — tenacious, passionate, relentless, resilient, agile, and comfortable operating in chaos. I said, “well for me you’d have to add coming from a dysfunctional family.” Her response was surprising, “Steve, almost all my CEO’s came from very tough childhoods. It was one of the characteristics I specifically looked for. It’s why all of you operated so well in the unpredictable environment that all startups face.”

I couldn’t figure out if I was more perturbed about how casual the comment was or how insightful it was.

Facts Exist Outside the Building

Monday, May 18th, 2009

When Steve Blank (The Four Steps to the Epiphany) took over SuperMac’s marketing department, he had to explain to his team that facts exist outside the building, opinions reside within — so get the hell outside the building:

My first day at work I found myself staring at a set of marketing faces, mostly holdovers from the previous version of the company that had gone belly up, some were bright and eager, some clearly hostile. “OK, let’s start with the basics, who does marketing think our customers are?” We went around the room and every one of them had an opinion. Unfortunately, all their answers were different.

By now, nothing surprised me. This was a company that had sold 15,000 graphics boards and monitors to consumers. A large number of these customers had mailed back their registration cards (this was pre-Internet) with their names, phone numbers, job titles, etc. So I asked the fatal question, “Has anyone ever looked at the customer registration cards? Has anyone ever spoken to a customer?” Silence. Most just stared at me like the question was incomprehensible. The one or two product mangers who should have known better glanced down at their shoes. Then someone asked, “Well, who do you think our customers are?” Ah, a leading question. I said, “I don’t know. And if I tell you what I think we’ll just have one more uninformed opinion. But what we need right now is some facts. Does anyone know where the registration cards that the customers sent back are?”

Why did I ask these questions? As a company with a past history, the company had a massive advantage over a typical startup — it had customers. Normally in a startup you spend an inordinate amount of time and energy in Customer Discovery and Customer Validation. Yet here was a “restart” with over 15,000 customers who by putting their money on the table had personally validated the market. Now I was cognizant I might find a customers that hated the products or company. Or I might have found that the company was in a business that wasn’t profitable and no way to get profitable (which I had concluded was the case with their commodity disk drive business.) But this was an opportunity that needed to start with customer facts, and I was going to get them.

Twenty minutes later a cart rolls into my office with 10,000 unprocessed, unlooked at, and untouched registration cards. All with names, addresses, phone numbers, job titles; all wonderful data longing for human contact.

How often do you get phone calls from the VP of Marketing?

With the questionnaire written I turned and stared at the cart full of registration cards. They were in shoeboxes arranged by month and year they were received. I figured that the newer ones were more relevant than those sent in years ago. I took a deep breath and plunged in. I grabbed 500 of the most recent cards, which were from the last four months, and I started calling. Quite honestly since few customers ever get “hi, how are you doing calls” directly from an executive at the company who sold them a product, I didn’t know what to expect. Would anyone take my call, would I get hung up on, would they answer this long list of questions?

Three hours and ten customers later I was beginning to feel like this would work. It had taken about two registration cards to get one customer on the line. And out of those, 9 out of 10 were happy to talk to me. Actually happy is the wrong word. Stunned was more like it. They had never had anyone from any company, let alone a computer company call and ask them anything. Then when I told them I was actually the VP of Marketing they were flabbergasted. They were happy to give me everything I asked for and more. And then to their surprise I offered them either a SuperMac coffee cup or T-shirt for their troubles. Now I had happy and surprised customers walking around with paid advertising for my company.

For the next three weeks I spent 8 hours a day calling customers and another 6 hours a day managing my new department. I’m sure the CEO thought I was crazy. But after three weeks and three hundred customer calls I was done. I had been to the mountaintop and had gotten the message.

He learned some pretty valuable information, including the fact that many customers valued performance over price — and customers never admit that they value anything over price.

The Curse of a New Building

Saturday, May 16th, 2009

Steve Blank (The Four Steps to the Epiphany) describes how his company suffered the Curse of a New Building:

The most obvious problem; the time we spent planning the building distracted the company from running the business. But there were three more insidious problems.
  1. While offices for everyone sound good on paper, moving everyone out of cubicles destroyed a culture of tight-knit interaction and communication. Individuals within departments were isolated, and the size and scale of the building isolated departments from each other.
  2. The new building telegraphed to our employees, “We’ve arrived. We’re no longer a small struggling startup. You can stop working like a startup and start working like a big company.” 
  3. We started to believe that the new building was a reflection of the company’s (and our own) success. We took our eye off the business. We thought that since we in such a fine building, we were geniuses, and the business would take care of itself.

While our competitors furiously worked on regaining market share, we were arguing about whether the carpets should be wool or nylon. The result was not pretty.

Killing Innovation with Corner Cases and Consensus

Thursday, April 23rd, 2009

Steve Blank (The Four Steps to the Epiphany) discusses killing innovation with corner cases and consensus:

I was visiting a friend whose company teaches executives how to communicate effectively. He had just filmed the second of a series of videos called, Speaking to the Big Dogs: How mid-level managers can communicate effectively with C-level executives (CEO, VP’s, General Managers, etc.) As we were plotting marketing strategy, I mentioned that the phrase “Speaking to the Big Dogs” might end up as his corporate brand. And that he might want to think about aligning all his video and Internet products under that name.
We were happily brainstorming when one of his managers spoke up and said, “Well, the phrase ‘Big Dogs’ might not work because it might not translate well in our Mexican and Spanish markets.” Hmm, that’s a fair comment, I thought, surprised they even had international locations. “How big are your Mexican and Spanish markets,” I asked? “Well, we’re not in those markets today… but we might be some day.” I took a deep breath and asked, “Ok, if you were, what percentage of your sales do you think these markets would be in 5 years?” “I guess less than 5%,” was the answer.
Now I mention this conversation not because the objection was dumb, but because objections like these happen all the time when you’re brainstorming. And when you are brainstorming you really do want to hear all ideas and all possible pitfalls. But entrepreneurial leaders sometimes forget that in startups, you can’t allow a “corner case” to derail fearless decision making.

A corner case, Blank explains, is technically reasonable and has some probability of occurring, but its probability of occurring is less than your probability of running out of money.